Piercing Line Candlestick Pattern

How a Piercing Line candlestick pattern is formed?

As we have discussed earlier that a Piercing candlestick pattern consists of two candles. It is formed when day 2’s bullish candle closes above the middle of the bearish candle of day 1. Moreover, it only forms during a downtrend in prices, and price gaps at the beginning of day 2 are also a must.

How to identify a Piercing candlestick pattern?

To identify a Piercing candlestick pattern, all the elements of its formation must be kept in mind. You should look for a pattern with two candlesticks. The second candlestick begins below the low of the bearish candle and closes above the middle of it. Bearish candlestick is usually of a red or any other dark color signifying a downtrend. The second candle is of a lighter or green color that signifies a high closing day. A Piercing candlestick pattern is a kind of special signal whenever it is formed because the reversal of the pattern is highly unexpected.

What does the pattern tell traders?

The first candlestick pinpoints a bearish trend in the trading market. The second candlestick opening with a bearish gap presents high expectations of bears. However, the second candle closes against the expectations of bears on a strong bullish note. Therefore, a Piercing pattern tells traders of an upcoming change of trend and also signals that bearish traders are now losing control.

How to trade a Piercing candlestick pattern?

Technical analysts and experts use other indicators as well to confirm a buying signal given by a Piercing line candlestick pattern. As a Piercing pattern indicates that bears lose control, as a result, a bullish movement is more likely. The bullish advancement on the second day also confirms that bulls have taken control of the market. This win of the bulls over bears is considered as a buying signal. Although a Piercing pattern signals a trend reversal, experts do not suggest to rely only on it. It is advised and recommended to use further support signals in conjunction with the Piercing candlestick pattern.